India’s investment, the main driver of economic growth in the mid-2000s when the country was growing in excess of 9 percent a year, has been sluggish for the past five years.

Private consumption is growing at a rate comparable to pre-crisis levels, but investment has not regained its strength.

The culprit is corporate investment: its share in GDP has fallen to about 10 percent—4 percentage points lower than that in 2007/08. This is a serious concern as India needs more supply capacity.

Reserve Bank of India (RBI) Governor Subbarao recently said that India’s “non-inflationary rate of growth is about 7 percent,” down from 8.5 percent before the global financial crisis, suggesting that supply constraints—for example in power, coal, and land—have become increasingly binding.

Amid the heaviest snowfall in Davos for decades, IMF chief Christine Lagarde has been making her case for urgent action to resolve the eurozone crisis, which is at the center of current global economic concerns. The Fund recently sharply revised downward its forecast for global economic growth and in a speech in Berlin Lagarde mapped a way forward.

Policy priorities

Lagarde has taken her messages to the Alpine resort in Switzerland, where global leaders are gathered for the 42nd Annual Meeting of the World Economic Forum. At the top of the agenda is the need to find and implement the policy solutions to avoid a downward economic spiral—or what Lagarde as has called a “1930s moment.” She set out some of the policy priorities in a video interview and stressed the need for policy action to be “coordinated, cooperative and comprehensive”. The main goal is to get growth going again “because that’s most needed. There is too much unemployment around the world,” Lagarde said. Continue reading →

I’ve been in Jordan this weekend, attending a vibrant meeting of the World Economic Forum on jobs and growth in the Middle East. I participated in a panel on employment with Queen Rania, and I’d like to share some of the ideas generated during that discussion and at the meeting more generally.

The atmosphere was both cautious and optimistic—cautious because of the growing risk of the downturn in advanced economies (particularly Europe) spreading to the region, and optimistic because of the recent political gains in both Libya and Tunisia in particular.

One of my biggest (and heartening) takeaways was that there were more young people bubbling with ideas and entrepreneurial spirit (ready to take risk) than ever before at this regional forum—which reflects a growing recognition of their current role in the Arab Spring and the role they will have to play in the future as drivers of economic change.

Creating jobs for the young and growing population in the Middle East and North Africa remains the dominant topic. Here on the Dead Sea, it’s jobs, jobs, jobs that are still on everybody’s mind. And it’s clear that there’s a tension between the high hopes for a better future in the long term and the impatience and frustration with difficulties and challenges in the short term. Continue reading →

In a video interview from Davos, IMF First Deputy Managing Director John Lipsky tells us that, with the return of global growth, the mood is certainly more optimistic than it was a year or two ago. But there is also a clear sense among delegates that this has not solved some of the world’s important economic problems. Continue reading →

In an interview from Davos, Switzerland, the IMF’s First Deputy Managing Director John Lipsky said that although the mood among delegates is more upbeat than it was one year ago during the crisis, people still have concerns about the resilience of the economic recovery.

In its latest world economic outlook, released just ahead of the World Economic Forum meeting in Davos, the IMF is forecasting that world growth will bounce back from negative territory in 2009 to 3.9 percent this year and 4.3 percent in 2011.

Lipsky also said it was clear that decision makers feel under intense political pressure to act on financial sector regulation. A consensus on how to move ahead on a financial sector tax hasn’t emerged yet, but Lipsky said that a process initiated by the G-20 industrialized and emerging market countries will play a key role in making decisions about the issue.